Retailers Discounting More Than Ever, Study Finds

Despite the recession’s end, retailers are discounting more than ever, according to a new survey of 70 retailers conducted by Miami-based Retail Systems Research.

Forty-one percent of retailers agree that their company has “become more promotions-driven in the past few years.” And 76 percent of respondents continue to increase the number of price changes sent to stores.

“While it was easy to understand heightened promotional activity at the peak of the Great Recession,” the study says, “the continued increase in promotional activity is a bit harder to explain.”

The study finds that price remains a key concern for retailers, with 67 percent of survey respondents citing “increased price sensitivity of consumers” as among their top business challenges, up from 46 percent in 2010.

But it argues that retailers need to refocus on corporate objectives, such as their brand image, and conduct a clear-eyed evaluation of what pricing strategies work and what don’t. The study notes that when Ron Johnson took over J.C. Penney, he conducted an evaluation that found that most of the company’s strategies were a waste of resources.

“One great offer does not solve a problem,” it said. “It just encourages consumers to search harder to find an even better deal next time … Retailers MUST find a way to differentiate—by finding ways to solve customers’ problems, so that service and value play a role alongside price.”

The study concludes: “The past two years have brought us back to a race to the bottom, and consumers trained to look for the next big deal. It is our hope that this can change. The health of [the retail] industry really does depend on it.”

The study, Retail Pricing in a Post-Channel World: Benchmark Report 2012, can be downloaded here.